Investing while on Active Duty

Begin with a Home Hack

You can use the VA loan for a property of four units or less. Find a place to live that suits you, and rent out the other units to subsidize your mortgage. The additional income allows you to begin saving for your next down payment right away. Having a lease with your name as the property owner starts the seasoning process– banks like to see (~ 2 years) before lending on commercial property.

Landlord For a While– Yourself

Managing the property yourself will help you know what to look for when you scale your business. It sucks– so do it until you learn enough to move on and do not get caught up in the savings of self-management. Trust me; the savings do not exceed the opportunity costs. A year is a practical goal, as this will give you a full cycle on a lease.

Purchase Cash-flowing Properties and Focus on Economy-of-scale

When you have a tax return showing rental income, banks will be nicer to you. However much you have saved, multiply that number by 5– this is the higher end of your price range. Search for properties that have cash flow between 2-4 units. Go higher if you can; just know that commercial real estate and lending requirements change for five units and higher. You will need a higher down payment and likely more experience for banks to lend to you. All banks are different, and it definitely does not hurt to try; just do your research and understand what you are getting into with your investment.

Keep Acquiring Assets

Make it a goal to acquire AT LEAST one asset each year. Markets rise and fall– but the people that survive crashes are the ones that bought for cash flow– not equity. Once you have enough cash flow to sustain you, you can begin targeting equity properties. This change in mindset only makes sense when you simply store your value in the real estate market as a commodity– similar to gold. Higher-end properties tend to cash flow less but have fewer issues due to their highly rentable locations, quality of their build, and/or the occupants they attract: fewer problems, less cash flow, but greater equity gains when the market increases.

Work Your Way Up to Commercial Real Estate

In secondary and tertiary markets (think cities without an NFL team), 5-20 unit apartment complexes can be purchased as Joint Ventures or by wealthier individuals that know real estate. 20-100 unit complexes are mostly bought by newly established syndication teams raising money from groups of investors that focus on real estate. 100-250 unit complexes are the playground of major syndicators that have established track records as well as the systems to manage large-scale operations. 250+ unit complexes often grab the attention of institutional money that will have enough money to make seemingly irrational purchases. It seems unreasonable to us as real estate investors, but remember these people are in a position to play the equity game. They are seeking to preserve capital (aka treat real estate like a commodity) and don’t expect the returns you will. Therefore, they can throw money at a steady asset and allow it to grow beyond the inflation rate.

Play Chess, Not Checkers

Develop your own strategy. Look at real estate possibilities as chess pieces:

  • Smaller deals you can do on your own are the pawns. They are a safe move to get your game started but take a long time to move across the board. To me, the best thing about a pawn is that the moment you move them, you open up opportunities to bring out the heavy hitters. Don’t forget about them though, when used correctly, you can get them across the board and level up into a better piece without paying the tax.
  • Multi-family is your more dynamic piece. It’s a matter of scale. With relatively the same effort it requires to move a pawn, you can move these pieces across the entire board. Using these pieces takes a deeper level of strategy, and making the wrong move assumes a bit more risk. However, as soon as you have a strong understanding of what you are doing– you can quickly become deadly.
  • Your Relationships are the Queen. Through partnerships and networking, you can move in any and every direction you want to go. No matter what you want to do, the right relationships can get you there. Relationships with other investors bring you ideas and also sharpen your strategy. Relationships with lenders allow you to leverage capital to support your next big move. Relationships with brokers let you know what the other chess pieces are up to so you can position your team to take them down. Relationships, like the queen, offer you dexterity across the board.
  • The King is your Happiness. Always remember this. The only reason other chess pieces exist is to fight for and protect your happiness. Like in chess, it is easy to get caught up in winning individual battles while at the same time losing the war. The moment you forget about your king– you’ve already lost the game. With every move, you should be thinking, is this helping my happiness? Is the move I am about to make part of my strategy or part of my ego?

With Mission First Capital, you can start your investment journey alongside other military members and veterans! If you have questions or would like to talk about potential partnerships or investment opportunities, don’t hesitate to reach out. Give us a call at +1 (844) 632-3863 or visit our website MissionFirstCapital.com to learn more and let’s invest today!